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£71m reverse takeover to cost 'several hundred' jobs

Under the deal, Bookham has handed over a 30 per cent stake in itself in return for the Nortel business.

The move is expected to cut costs by 40 per cent and quadruple Bookham's sales, but the company admitted that several hundred jobs from the combined total of 2,000 are expected to go.

Nortel Networks will sell its transmitter and receiver business, located in Devon, Harlow in Essex and Ottawa, and the pump laser and amplifiers business located in Devon, Zurich, and Poughkeepsie in New York.

The deal also includes a three-year supply agreement worth $120m. On completion, Bookham will pay $10m for restructuring expenses incurred by Nortel in connection with the transaction.

Brian McFadden, president of the Optical Networks unit at Nortel, said in a statement: "This transaction is an important step in our path to profitability and our strategy to focus on the delivery of high performance, cost-effective optical network solutions for our customers.

"This strategic relationship with Bookham will enable Nortel Networks to maintain its supply of best-in-class optical components from a world-class supplier.

"We are excited about this relationship and our ability to jointly collaborate on next-generation components, and we expect that it will drive innovation and customer-responsive solutions for both companies."